While plenty of high-yield opportunities exist, investors must always consider the safety of their dividend and the total return potential of their investment. It is not uncommon for a struggling company to suspend high-yielding dividends which could subsequently result in precipitous share price declines.
TheStreet Ratings' stock rating model views dividends favorably, but not so much that other factors are disregarded. Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e. how much one is willing to risk in order to earn profits?; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to its stock's performance.
These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks. As always, stock ratings should not be treated as gospel — rather, use them as a starting point for your own research.
The following pages contain our analysis of 3 stocks with substantial yields, that ultimately, we have rated "Buy."Home Properties Dividend Yield: 4.50% Home Properties (NYSE: HME) shares currently have a dividend yield of 4.50%. Home Properties, Inc. is an independent real estate investment trust. The firm invests in the real estate markets of the United States. It is engaged in the ownership, management, acquisition, rehabilitation and development of residential apartment communities. The company has a P/E ratio of 24.53. The average volume for Home Properties has been 349,600 shares per day over the past 30 days. Home Properties has a market cap of $3.9 billion and is part of the real estate industry. Shares are up 4.8% year-to-date as of the close of trading on Thursday. STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more. TheStreet Ratings rates Home Properties as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- HME's revenue growth has slightly outpaced the industry average of 0.6%. Since the same quarter one year prior, revenues slightly increased by 2.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, HME's share price has jumped by 28.29%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, HME should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Real Estate Investment Trusts (REITs) industry average. The net income increased by 16.7% when compared to the same quarter one year prior, going from $56.92 million to $66.43 million.
- HOME PROPERTIES INC's earnings per share declined by 27.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, HOME PROPERTIES INC reported lower earnings of $1.51 versus $1.65 in the prior year. This year, the market expects an improvement in earnings ($1.84 versus $1.51).
- You can view the full Home Properties Ratings Report.
- The revenue growth came in higher than the industry average of 0.6%. Since the same quarter one year prior, revenues rose by 22.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 542.0% when compared to the same quarter one year prior, rising from $1.97 million to $12.62 million.
- Net operating cash flow has increased to $31.16 million or 30.64% when compared to the same quarter last year. In addition, GOVERNMENT PPTYS INCOME TR has also vastly surpassed the industry average cash flow growth rate of -55.11%.
- GOVERNMENT PPTYS INCOME TR's earnings per share declined by 18.2% in the most recent quarter compared to the same quarter a year ago. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, GOVERNMENT PPTYS INCOME TR increased its bottom line by earning $1.02 versus $1.01 in the prior year. This year, the market expects an improvement in earnings ($1.13 versus $1.02).
- You can view the full Government Properties Income Ratings Report.
- The gross profit margin for BLACKSTONE GROUP LP is rather high; currently it is at 61.02%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 27.28% is above that of the industry average.
- Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- BLACKSTONE GROUP LP's earnings per share declined by 14.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BLACKSTONE GROUP LP increased its bottom line by earning $2.59 versus $1.98 in the prior year. This year, the market expects an improvement in earnings ($3.76 versus $2.59).
- BX, with its decline in revenue, underperformed when compared the industry average of 13.4%. Since the same quarter one year prior, revenues fell by 25.4%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Capital Markets industry. The net income has decreased by 11.2% when compared to the same quarter one year ago, dropping from $621.26 million to $551.45 million.
- You can view the full Blackstone Group Ratings Report.
- Our dividend calendar.